Generally, insurance premiums are calculated based on a number of factors, including the likelihood of damage to or loss of an insured item (based on risk factors) and the amount of insurance coverage for an insured entity. In some cases, the amount of insurance coverage is the maximum amount that will be paid out in the event of loss or damage to an insured entity. In some instances, payments above the amount of insurance can be paid out if certain circumstances are present.
In some instances, the amount of insurance coverage for an entity can be set based on a replacement cost of an insured entity. For example, an amount of insurance for a car covered under an insurance policy can be set at the replacement cost for the car. The replacement cost can be the average market value of a car of the same make, model, year, and mileage. In some cases, a purchaser of an insurance policy is allowed to indicate an amount of insurance for an insured entity. In some instances, a purchaser may indicate an amount of insurance that is greater than a replacement cost for an insured entity. For example, mortgage holders for homes or other buildings may require a home/building owner to purchase enough insurance to cover the amount remaining on the mortgage, which can be greater than the replacement value of a home or building.
In some instances, an insurance purchaser may select an amount of insurance that is greater than a replacement cost for an insured entity for increased peace of mind. Additionally, a purchaser may select an amount of insurance that is greater than the replacement cost for an insured entity so that fluctuations in replacement costs do not have to be closely monitored. If the amount of insurance selected is significantly greater than the replacement cost for an insured entity, there is likelihood that the replacement cost may not exceed the amount of insurance as the replacement cost changes over time.
In many cases, when an amount of insurance for an insurance policy is greater than a replacement cost for an insured entity, the amount paid out for total loss of the insured entity is the replacement cost, and not the amount of insurance. This indicates that insurance policy holders may not be receiving additional benefits for the amount of insurance that exceeds the replacement cost of an insured entity and are therefore paying additional insurance premium costs for a benefit that may not likely be fully realized.
Therefore, there is a need in the art for systems, apparatuses, and methods for improved insurance premium determination, including means for determining insurance premiums to better reflect the true benefit of an amount of insurance that exceeds the replacement cost for an insured entity. Various aspects of the disclosure overcome deficiencies and limitations of the prior art.